Recall that leisure time in our model of the representative consumer is intended to capture any time spent not working in the market, including production at home, such as yard work and caring for children. Suppose that the government were to provide free day care for children and, for the purpose of analyzing the effects of this, assume that this has no effect on the market real wage w, taxes T, and dividend income . Assume that initially the representative consumer uses some but not all available time for leisure, and assume that the consumer is indifferent between time leisure time spent caring for children and leisure time spent in other ways. Determine the effects of the daycare program on consumption, leisure (including government-provided daycare services), and hours worked for the consumer. A Click the icon to view information about the initial model used here. In this case, the substitution effect V in consumption and in leisure, and the income effect V in consumption and in leisure. Overall for the representative consumer, there in consumption, there V in leisure, and there in hours worked. may be an increase, a decrease, or no change will be no change will be an increase will be a decrease

Recall that leisure time in our model of the representative consumer is intended to capture any time spent not working in the market, including production at home, such as yard work and caring for children. Suppose that the government were to provide free day care for children and, for the purpose of analyzing the effects of this, assume that this has no effect on the market real wage w, taxes T, and dividend income . Assume that initially the representative consumer uses some but not all available time for leisure, and assume that the consumer is indifferent between time leisure time spent caring for children and leisure time spent in other ways. Determine the effects of the daycare program on consumption, leisure (including government-provided daycare services), and hours worked for the consumer. A Click the icon to view information about the initial model used here. In this case, the substitution effect V in consumption and in leisure, and the income effect V in consumption and in leisure. Overall for the representative consumer, there in consumption, there V in leisure, and there in hours worked. may be an increase, a decrease, or no change will be no change will be an increase will be a decrease

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Consider a worker who consumes one good and has a preference for leisure. She maximizes the utility function u(x, L) = xL, where a represents consumption of the good and L represents leisure. Suppose that this worker can choose any L € [0, 1], and receives income w(1 – L); w represents the wage rate. Let p denote the price of the consumption good. In addition to her wage income, the worker also has a fixed income of y ≥ 0. (a) Write down the utility maximization problem for this consumer. Solution: The problem is max x L s.t. px ≤w(1 L) + y. x>0, LE [0,1] The budget constraint may also be written with equality since preferences are monotone. (b) Find the Marshallian demands for the consumption good and leisure. Solution: Using FOCs will find the maximum since preferences are Cobb-Douglas (and therefore convex). Dividing the FOCs L= Xp and x = Xw gives wL = px. Substituting into the budget constraint and checking the restriction L = [0, 1], we get and x(p, w, y) L(p, w, y) = = = 1 w+y…
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Which of the following related to Transfer payment? Pocket money to children Payment made to housewife All the above wear and tear cost
3. Consider the economic model of an individual's labor-leisure choice with the following components: C represents units of the consumption good L represents hours of leisure H represents hours of paid work p represents the unit price of the consumption good w represents the hourly wage rate Y represents nonlabor income T represents total time available U(C, L) represents the individual's utility function MUC denotes the marginal utility of consumption MUL denotes the marginal utility of leisure Unless otherwise instructed, assume that consumption and leisure are normal goods. Whenever graphi the model, put C on the vertical axis and L on the horizontal axis. What is the slope of the budget line? -(MUC/MUL) O-(MUL/MUC) O-W O -(w/p) O-(w+Y)/p
An individual can earn $12 per hour if he or she works. Assume that a person can work at most 24 hours per day times 30 days per month for a total of 720 hours. Thus, the axis intercepts, in the absence of any program, are 720 x $12 = $8,640 in consumption and 720 hours of leisure. Scenario: Suppose that a new welfare program is introduced where the government guarantees $600 per month in income and reduces the benefit by $1 for each $1 of labor income. Below are the budget constraints that show the monthly income-leisure trade-off. Monthly income $8,640 $600 720 Leisure (hours) With 40% reduction rate, when he/she works 30 hours, where will he/she maximize his/her utility? O A. Point B O B. Point C O C. Point D O D. Point F
b. Using Fisher's Intertemporal Choice model, consider the following scenario: Suppose Milo earns $1,750 in the first period and $2,500 in the second period. If he consumes $1,200 in the first period and $1,550 in the second period, what is the i. interest rate? ii. Now if Milo's consumption changes to $1,800 in the first period and $2,000 in the second period, what is the new interest rate?
The one-period model with quasi-linear utility predicts that a decrease in marginal income tax rates could increase tax collection if:Group of answer choices Substitution effects dominate income effects so that the percent change in taxes is greater than the percent change in GDP Substitution effects dominate income effects so that the percent change in taxes is less than the percent change in GDP Income effect dominate substitution effects so that the percent change in taxes is less than the percent change in GDP Income effects dominate substitution effects so that the percent change in taxes is greater than the percent change in GDP
3. Consider a model where a consumer, Mehdi, is deciding how to allocate their 24 hours each day between work and leisure. The take-home wage they initially receive is w = 15, but following a rise in income tax, their take-home pay falls to w = 12. Following this change in the wage rate, Mehdi reallocates his time between work and leisure, as shown in the diagram below. Composite good 41 42 43 Time Constraint 24 Leisure (0-24)/ Work (24-0) Given this information, which of the following conclusions can we reach? (a) The substitution and income effects both cause Mehdi to take more leisure time, meaning leisure is a normal good. (b) The substitution effect and income effects both cause Mehdi to take less leisure time, meaning leisure is a normal good. (c) The substitution effect causes Mehdi to take more leisure time, while the income effect causes Mehdi to take less leisure time, meaning leisure is an inferior good. (d) The substitution effect causes Mehdi to take more leisure time,…
“The executive action is estimated to increase Supplemental Nutrition Assistance Program (SNAP) benefits, otherwise known as food stamps, for the 12 million families who rely on the aid most. The order would increase weekly benefits for a family of four by 15 or 20 per cent. An increase of benefits awarded through a school meals program for low-income families could also give a family of three children more than $100 in extra benefits every two months” (Hall, 2021). What problems do you foresee if these benefits were not available to these low-income families and migrants within the U.S.?
In this hypothetical economy, there are two consumers living over two periods of life. Ann's incomes are $50,000 in both periods. Meanwhile, Bob earns nothing in the first period but $105,000 in the second period. Both of them can borrow or lend at the interest rate r. For simplicity, assume that there are no taxes. a)Assume that both Ann and Bob consume $50,000 in the first period and $50,000 in the second period. Write down the lifetime budget constraint for each consumer then calculate the interest rate r. Describe the economic behaviour of each consumer. b) Suppose the interest rate increases. What will happen to Ann's consumption in the first period? Is Ann better off or worse off than before the interest rate rises? Explain your answer using an appropriate diagram c) What will happen to Bob's consumption in the first period when the interest rate increases? Is Bob better off or worse off than before the interest rate increases? Explain your answer using an appropriate diagram.
Q1: Suppose Labor and Capital are substitutes and the price of capital falls. All else equal, we should expect the labor select (supply, demand) Curve shift select ( up to the right, down to the left ) and for equilibrium wages to select (rise, fall) Q2: An individual has a utility function over Leisure and Income such that ?=?1/2?1/2 This individual has a budget constraint ?=?⋅(24−?)+? The best possible wage this individual can earn in the labor market is $2 per hour. This individual is $30 in debt (they have negative non-labor income). If this individual is earning a utility level of 4, which of the following are true? Group of answer choices The worker could be supplying 1 unit of Labor The worker could be earning $10 The worker could be supplying 8 units of labor The worker is maximizing their utility given their budget The worker's Marginal Rate of Substitution at the point where the budget constraint intersects the indifference curve is equal to -2